Even More 1099's

In 2012, additional 1099 reporting requirements are due to take effect, unless Congress repeals them. They would require that anyone with any business income issue 1099s to any vendor to whom they paid at least $600. Payments for both goods and services would require 1099s. (Under current law, payments for goods are not covered, and the focus is on payments to unincorporated individuals.)

Congress and the President have talked about repealing this new requirement, because nobody likes it. However, because it is projected to generate over $200 billion in tax revenues over the next 10 years, they have to figure out how to plug that budget gap if they repeal it. There is a lot of momentum on the side of repealing it, but it may not be easy.

Unreported gifts

Many people transfer real estate titles to heirs or other family members without filing a gift tax return. The IRS has never checked on this to any great extent, but it is starting to do so now. If the transfer was done for anything less than fair market value, it could trigger the need for a gift tax return. Most people would not owe any actual gift tax, because their gifts are under the tax threshold. However, the law says a gift tax return must be filed. A gift tax return is supposed to be filed if you give any one person more than $13,000 during a calendar year. (The filing threshold was $10,000 several years ago; it has been gradually raised over the past few years to the present threshold of $13,000.)

Obamacare legal setback

A Federal district court judge in Florida ruled that the healthcare reform law is unconstitutional. The Supreme Court will get the final word--in a year or two.

filing delay date

The IRS has specified February 14, 2011, as the date on which it will begin accepting returns with certain characteristics. The most popular of these characteristics is itemized deductions. Most returns without itemized deductions are already being accepted.

Landlords must issue 1099s

Beginning in 2011, landlords must issue 1099s if they pay someone (e.g., a self-employed carpenter or plumber) $600 or more during the year. Previously, landlords were not covered by the 1099 laws.

Some landlords will be exempt if their rental income is very small. The IRS will let us know at a later date (hopefully sometime this year) how much rental income will trigger the 1099 requirement.

Qualified Charitable Distribution

One of the last-minute changes in the new tax law had to do with the option for people over 70 and a half years old to make a charitable donation directly from their IRA without declaring it as income. That provision was supposed to expire as of 12/31/09, but there was some confusion over it during the year, probably because it was almost, but not quite, renewed during the year. Now it has indeed been renewed. And because of the last-minute nature of the renewal, eligible taxpayers have been given the option to make such a distribution in January of 2011 that can be counted as happening in 2010. Contact your IRA administrator.

Tax filing delay

The IRS has announced that it will need some extra time to reprogram their computers in regard to some of the provisions of the new tax law. Therefore returns with certain tax features will not be accepted until mid- to late February. Those situations are:

1. Anyone who files a Schedule A
2. State and local sales tax deduction
3. Tuition and fees deduction for higher education
4. Educator expenses.

The IRS will announce specific dates later.